Thank you for standing by, and welcome to Sturm, Ruger's First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-andanswer session. [Operator Instructions]. In the first quarter of 2024, we implemented a reduction in force that impacted about 80 of our employees and resulted in a severance expense of $1.5 million. This charge reduced earnings per share by $0.07. Chris will provide further commentary on th ...

[First Quarter 2024 Financial Results Overview](index=1&type=section&id=Q1_2024_Financial_Results_Overview) Sturm, Ruger & Company, Inc. reported a decline in net sales and diluted earnings per share for Q1 2024 compared to Q1 2023, with net sales at $136.8 million and diluted EPS at 40¢ [Financial Performance Highlights](index=1&type=section&id=Financial_Performance_Highlights) Sturm, Ruger & Company, Inc. reported a decline in net sales and diluted earnings per share for Q1 2024 compared to Q1 2023, with net sales at $136.8 million and diluted EPS at 40¢ Q1 2024 vs. Q1 2023 Key Financials | Metric | Q1 2024 | Q1 2023 | Change (YoY) | | :----- | :------ | :------ | :----------- | | Net Sales | $136.8 million | $149.5 million | -8.4% | | Diluted EPS | 40¢ | 81¢ | -50.6% | [Quarterly Dividend Declaration](index=1&type=section&id=Quarterly_Dividend_Declaration) The Board of Directors declared a quarterly dividend of 16¢ per share for Q1 2024, payable on June 7, 2024, to stockholders of record as of May 20, 2024, representing approximately 40% of net income - The Company declared a quarterly dividend of **16¢ per share**, representing approximately **40% of net income**[4](index=4&type=chunk) [CEO Commentary and Business Review](index=1&type=section&id=CEO_Commentary_Business_Review) The CEO's commentary highlights market conditions, strategic initiatives, and key performance observations for the quarter [Market Conditions and Product Demand](index=1&type=section&id=Market_Conditions_Product_Demand) Despite an overall decline in the firearms market during Q1 2024, Sturm, Ruger experienced strong demand for several product families, including recently introduced and anniversary products, which drove sales increases from the fourth quarter and led to significant reductions in inventory - Overall firearms market declined in Q1 2024, but demand for several product families, including recently introduced and anniversary products (e.g., 75th Anniversary Mark IV Target pistol, 10/22 rifles, LCP MAX pistol, American Rifle Generation II), remained strong[5](index=5&type=chunk)[7](index=7&type=chunk) - Strong distributor sell-through led to significant reductions in both finished goods inventory and distributor inventory during Q1 2024[6](index=6&type=chunk) [Strategic Initiatives and Operational Efficiency](index=2&type=section&id=Strategic_Initiatives_Operational_Efficiency) The company implemented strategic moves to ensure long-term success and enhance efficiency, including a business reorganization and a reduction in force affecting approximately 80 employees, with half reassigned to manufacturing, incurring a $1.5 million severance expense but projected to generate $9 million in annualized savings - Reorganized specific aspects of the business to achieve greater efficiency and productivity[6](index=6&type=chunk) - Undertook a reduction in force impacting about **80 employees**, with approximately half reassigned to manufacturing positions[6](index=6&type=chunk) Impact of Reduction in Force | Metric | Amount | | :----- | :----- | | Severance Expense (Q1) | $1.5 million | | Annualized Savings | ~$9 million | [Key Performance Observations](index=2&type=section&id=Key_Performance_Observations) Key observations for Q1 2024 include a 1% increase in unit sell-through to retailers despite a decline in NICS background checks, significant growth in new product sales, and a decrease in gross margin from 26% to 21% due to product mix, deleveraging, and inflation, alongside strong cash flow, reduced inventories, and $7.3 million returned to shareholders [Sales and Market Trends](index=2&type=section&id=Sales_Market_Trends) Unit sell-through to retailers increased despite a decline in NICS background checks, with new product sales showing significant growth - Estimated unit sell-through from independent distributors to retailers increased **1%** in Q1 2024 compared to prior year, while NICS background checks decreased **4%**[8](index=8&type=chunk) New Product Sales Performance | Metric | Q1 2024 | Q1 2023 | Change (YoY) | | :----- | :------ | :------ | :----------- | | New Product Sales | $42 million | $30 million | +40.0% | | % of Firearm Sales | 32% | 21% | +11 ppts | [Profitability and Cost Drivers](index=2&type=section&id=Profitability_Cost_Drivers) Gross margin decreased due to product mix shift, deleveraging of fixed costs, and inflationary pressures on materials and services - Gross margin decreased from **26%** in Q1 2023 to **21%** in Q1 2024[8](index=8&type=chunk) - Lower margin driven by product mix shift to lower-margin products, unfavorable deleveraging of fixed costs from decreased production/sales, and inflationary cost increases (materials, commodities, services, energy, fuel, transportation)[8](index=8&type=chunk)[11](index=11&type=chunk) [Inventory Management](index=3&type=section&id=Inventory_Management) The company achieved significant reductions in both finished goods and distributor inventory during the quarter Q1 2024 Inventory Reductions | Inventory Type | Q1 2024 Decrease (Units) | | :------------- | :----------------------- | | Finished Goods | 30,900 | | Distributor | 51,300 | [Cash Flow and Liquidity](index=3&type=section&id=Cash_Flow_Liquidity) Strong cash flow from operations and a robust liquidity position were maintained, with no outstanding debt Q1 2024 Cash Flow and Liquidity | Metric | Q1 2024 | | :----- | :------ | | Cash Provided by Operations | $7.3 million | | Cash & Short-term Investments (as of Mar 30, 2024) | $115.3 million | | Current Ratio | 5.2 to 1 | | Debt | None | [Capital Expenditures](index=3&type=section&id=Capital_Expenditures) Capital expenditures for Q1 2024 were $1.8 million, with an estimated full-year total of approximately $15 million Capital Expenditures | Metric | Q1 2024 | Full Year 2024 Estimate | | :----- | :------ | :---------------------- | | Capital Expenditures | $1.8 million | ~$15 million | [Shareholder Returns](index=3&type=section&id=Shareholder_Returns) The company returned $7.3 million to shareholders through quarterly dividends and common stock repurchases Q1 2024 Shareholder Returns | Shareholder Return Component | Q1 2024 Amount | | :--------------------------- | :------------- | | Quarterly Dividend Payment | $4.1 million | | Common Stock Repurchase | $3.2 million | | Total Shareholder Returns | $7.3 million | - Repurchased **75,024 shares** of common stock in the open market at an average price of **$42.89 per share**[11](index=11&type=chunk) [Stockholders' Equity](index=3&type=section&id=Stockholders%27%20Equity) Stockholders' equity remained strong at $332.0 million, with a book value of $19.08 per share Stockholders' Equity as of March 30, 2024 | Metric | As of March 30, 2024 | | :----- | :------------------- | | Stockholders' Equity | $332.0 million | | Book Value Per Share | $19.08 | | Cash & Short-term Investments Per Share | $6.63 | [Corporate Communications and Financial Filings](index=3&type=section&id=Corporate_Communications_Financial_Filings) The company filed its Q1 2024 Form 10-Q and will host an investor webcast to discuss operating results [SEC Filings and Investor Webcast](index=3&type=section&id=SEC_Filings_Investor_Webcast) Sturm, Ruger & Company, Inc. filed its Quarterly Report on Form 10-Q for Q1 2024 and will host a webcast on May 8, 2024, to discuss the operating results, with the report available on the SEC website and Ruger's corporate website - Filed Quarterly Report on Form 10-Q for Q1 2024[9](index=9&type=chunk) - Will host a webcast on May 8, 2024, at 9:00 a.m. ET to discuss Q1 2024 operating results[10](index=10&type=chunk) - Form 10-Q is available on SEC.gov and Ruger.com/corporate[11](index=11&type=chunk) [Company Information](index=4&type=section&id=Company_Information) Provides an overview of Sturm, Ruger & Co., Inc. as a leading firearms manufacturer and includes a disclaimer regarding forward-looking statements [About Sturm, Ruger & Co., Inc.](index=4&type=section&id=About_Sturm_Ruger_Co_Inc) Sturm, Ruger & Co., Inc. is a leading U.S. manufacturer of rugged, reliable firearms for the commercial sporting market, offering nearly 800 variations across over 40 product lines under both the Ruger and Marlin brands, with a 75-year commitment to corporate and community responsibility - Leading US manufacturer of firearms for the commercial sporting market, offering almost **800 variations** of over **40 product lines** (Ruger and Marlin brands)[12](index=12&type=chunk) - **75 years** of corporate and community responsibility with the motto 'Arms Makers for Responsible Citizens'[12](index=12&type=chunk) [Forward-Looking Statements Disclaimer](index=4&type=section&id=Forward_Looking_Statements_Disclaimer) The company cautions investors that forward-looking statements are based on current expectations and are subject to various qualifying risks and uncertainties that could cause actual results to differ materially, advising readers not to place undue reliance on these statements and undertaking no obligation to update them - Forward-looking statements are subject to qualifying risks and uncertainties (e.g., market demand, sales levels, litigation, legislation, accounting estimates) that could cause actual results to differ materially[13](index=13&type=chunk) - Readers are cautioned not to place undue reliance on these statements, and the Company undertakes no obligation to publish revised statements[13](index=13&type=chunk) [Condensed Consolidated Financial Statements (Unaudited)](index=5&type=section&id=Condensed_Consolidated_Financial_Statements_%28Unaudited%29) Presents the unaudited condensed consolidated balance sheets, statements of income, and cash flows for the first quarter of 2024 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed_Consolidated_Balance_Sheets) The balance sheet shows a slight decrease in total assets from $398.8 million at December 31, 2023, to $385.0 million at March 30, 2024, primarily driven by reductions in short-term investments and net inventories, while total stockholders' equity remained stable at approximately $332.0 million Condensed Consolidated Balance Sheets (Dollars in thousands) | Metric (in thousands) | March 30, 2024 | December 31, 2023 | Change | | :-------------------- | :------------- | :---------------- | :----- | | Total Current Assets | $258,575 | $271,395 | $(12,820) | | Net Property, Plant & Equipment | $67,755 | $71,534 | $(3,779) | | Total Assets | $384,977 | $398,817 | $(13,840) | | Total Current Liabilities | $50,052 | $63,195 | $(13,143) | | Total Stockholders' Equity | $331,956 | $331,721 | $235 | [Condensed Consolidated Statements of Income and Comprehensive Income](index=7&type=section&id=Condensed_Consolidated_Statements_of_Income) For the three months ended March 30, 2024, net sales decreased to $136.8 million from $149.5 million in the prior year, leading to a significant drop in net income from $14.4 million to $7.1 million and diluted EPS from $0.81 to $0.40, with gross profit declining due to higher cost of products sold relative to sales Condensed Consolidated Statements of Income (Dollars in thousands, except per share) | Metric (in thousands, except per share) | Three Months Ended March 30, 2024 | Three Months Ended April 1, 2023 | Change (YoY) | | :------------------------------------ | :-------------------------------- | :------------------------------- | :----------- | | Total Net Sales | $136,820 | $149,453 | $(12,633) | | Cost of Products Sold | $107,417 | $110,967 | $(3,550) | | Gross Profit | $29,403 | $38,486 | $(9,083) | | Operating Income | $7,531 | $17,021 | $(9,490) | | Income Before Income Taxes | $9,047 | $18,492 | $(9,445) | | Net Income | $7,084 | $14,350 | $(7,266) | | Diluted Earnings Per Share | $0.40 | $0.81 | $(0.41) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed_Consolidated_Statements_of_Cash_Flows) Cash provided by operating activities increased to $7.3 million in Q1 2024 from $5.3 million in Q1 2023, primarily due to changes in inventories and employee compensation, while cash used for financing activities decreased significantly due to lower dividend payments compared to the prior year Condensed Consolidated Statements of Cash Flows (Dollars in thousands) | Metric (in thousands) | Three Months Ended March 30, 2024 | Three Months Ended April 1, 2023 | Change (YoY) | | :-------------------- | :-------------------------------- | :------------------------------- | :----------- | | Cash Provided by Operating Activities | $7,345 | $5,284 | $2,061 | | Cash Provided by Investing Activities | $1,211 | $35,456 | $(34,245) | | Cash Used for Financing Activities | $(7,923) | $(97,861) | $89,938 | | Increase (Decrease) in Cash | $633 | $(57,121) | $57,754 | | Cash and Cash Equivalents at End of Period | $15,807 | $8,052 | $7,755 | [Non-GAAP Financial Measures](index=9&type=section&id=Non_GAAP_Financial_Measures) Provides definitions and reconciliations for non-GAAP financial measures, specifically EBITDA and EBITDA margin, to offer additional insights into the company's operating performance [EBITDA Definition and Rationale](index=9&type=section&id=EBITDA_Definition_Rationale) The company provides non-GAAP financial measures, EBITDA and EBITDA margin, to offer investors additional insights into operating results and underlying business performance, believing these metrics are useful for understanding the company's ability to meet capital expenditure and working capital requirements, and as an indicator of profitability - EBITDA is defined as earnings before interest, taxes, and depreciation and amortization[20](index=20&type=chunk) - EBITDA and EBITDA margin provide useful information for understanding operating results, ongoing business performance, ability to meet capital expenditure and working capital requirements, and profitability[19](index=19&type=chunk) [Non-GAAP Reconciliation – EBITDA](index=9&type=section&id=Non_GAAP_Reconciliation_EBITDA) For Q1 2024, EBITDA was $13.5 million, resulting in an EBITDA margin of 9.9%, a decrease from $23.8 million and 16.0% in Q1 2023, reflecting the decline in net income and overall profitability Non-GAAP Reconciliation – EBITDA (Unaudited, dollars in thousands) | Metric (in thousands) | Three Months Ended March 30, 2024 | Three Months Ended April 1, 2023 | Change (YoY) | | :-------------------- | :-------------------------------- | :------------------------------- | :----------- | | Net Income | $7,084 | $14,350 | $(7,266) | | Income Tax Expense | $1,963 | $4,142 | $(2,179) | | Depreciation and Amortization Expense | $5,833 | $6,536 | $(703) | | Interest Income | $(1,355) | $(1,214) | $(141) | | Interest Expense | $17 | $25 | $(8) | | EBITDA | $13,542 | $23,839 | $(10,297) | | EBITDA Margin | 9.9% | 16.0% | -6.1 ppts |

Financial Data and Key Metrics Changes - In 2023, net sales decreased to $544 million from $596 million in 2022, representing a 9% reduction year-over-year [20] - Diluted earnings per share fell to $2.71 in 2023 from $4.96 in 2022 [20] - Gross margin declined from 30% in 2022 to 25% in 2023 due to unfavorable fixed cost deleveraging and inflationary pressures [4] Business Line Data and Key Metrics Changes - New product sales accounted for $122 million or 23% of firearm sales in 2023, up from $78 million or 14% in 2022 [25] - Inventory at independent distributors decreased by 39,000 units in 2023 despite decreased demand [7] - The average selling price of orders received decreased slightly compared to Q1 and Q2, but increased from Q3 [12] Market Data and Key Metrics Changes - Estimated unit sell-through from independent distributors to retailers decreased by 7% in 2023 compared to 2022 [22] - NICS background checks, adjusted by the National Shooting Sports Foundation, decreased by 4% in 2023 [65] Company Strategy and Development Direction - The company is focusing on long-term shareholder value and maintaining a debt-free balance sheet, with cash and short-term investments totaling $118 million as of December 31, 2023 [69] - The company plans to introduce commemorative firearms for its 75th anniversary in 2024, alongside new product launches [23][24] - The company is actively working on cost reduction initiatives to improve gross margins [59] Management's Comments on Operating Environment and Future Outlook - Management noted that consumer demand remained soft throughout 2023, likely due to inflationary pressures and rising interest rates [22] - The company is optimistic about demand in 2024, especially in an election year, but is cautious about potential regulatory impacts [31] - Management emphasized the importance of maintaining quality while ramping up production to meet demand for popular models [53] Other Important Information - The company returned $123 million to shareholders in 2023 through dividends and share repurchases [5] - The board declared a quarterly dividend of $0.23 per share, payable on March 28, 2024 [22] - The company has approximately $75 million remaining authorized for share repurchases [22] Q&A Session Summary Question: Impact of product mix on average selling price - Management indicated that the average selling price decreased slightly due to a shift in product mix, but strong unit sales were achieved [12] Question: Outlook for consumer demand in an election year - Management expressed that historical trends suggest solid demand in election years, but current visibility is limited [31] Question: Inflationary pressures and cost management - Management acknowledged persistent inflation in certain commodities and wages, but noted that price increases have stabilized [33][41] Question: Meeting demand for Marlin rifles - Management confirmed that production capacity for Marlin rifles has been increased, but quality must be maintained while ramping up output [53] Question: Performance of the accessories business - Management reported that the accessories segment is profitable and highlighted a successful promotional campaign that drove sales [54]

[Executive Summary & Financial Highlights](index=1&type=section&id=executive_summary_financial_highlights) The section summarizes 2023 financial performance, dividend declarations, and the CEO's commentary on market conditions and future outlook [Full Year and Fourth Quarter 2023 Financial Performance](index=1&type=section&id=Full%20Year%20and%20Fourth%20Quarter%202023%20Financial%20Performance) Sturm, Ruger & Company, Inc. reported a decline in net sales and diluted earnings per share for both the full year and fourth quarter of 2023 compared to 2022 Key Financial Performance Metrics | Metric | FY 2023 | FY 2022 | Q4 2023 | Q4 2022 | | :----- | :------ | :------ | :------ | :------ | | Net Sales | $543.8 million | $595.8 million | $130.6 million | $149.2 million | | Diluted EPS | $2.71 | $4.96 | $0.58 | $1.06 | [Dividend Declaration](index=1&type=section&id=Dividend%20Declaration) The Board of Directors declared a quarterly dividend of 23¢ per share for Q4 2023, representing approximately 40% of net income - Quarterly dividend declared at **23¢ per share** for Q4 2023, representing approximately **40% of net income**[5](index=5&type=chunk) [CEO Commentary on 2023 Performance and 2024 Outlook](index=2&type=section&id=CEO%20Commentary%20on%202023%20Performance%20and%202024%20Outlook) CEO Christopher J. Killoy discussed soft consumer demand in 2023, a 9% sales reduction, and the company's disciplined approach, while expressing optimism for 2024 with increased Q4 sales and a strong product pipeline - Consumer demand remained soft in 2023, likely dampened by inflationary pressures and rising interest rates, leading to a **9% reduction in sales** from the prior year[6](index=6&type=chunk) - The company remained disciplined, reducing production levels and offering modest promotions, resisting the temptation to enhance short-term results at the expense of long-term strategy[6](index=6&type=chunk) - Entering 2024 with increased quarterly sales and profitability in the fourth quarter, a **strong, debt-free balance sheet**, reduced inventories at independent distributors, and a full pipeline of new products[6](index=6&type=chunk) [Operational Review](index=3&type=section&id=operational_review) This section reviews new product introductions, market and sales performance, and strategies for profitability and inventory management [Product Introductions and Anniversaries](index=3&type=section&id=Product%20Introductions%20and%20Anniversaries) Sturm, Ruger & Company is celebrating its 75th Anniversary in 2024 with commemorative firearms and special limited production editions, alongside recent new product introductions that have received strong demand - Ruger is celebrating its **75th Anniversary in 2024** by offering commemorative firearms engraved with the 75th Anniversary logo and special, limited production editions of other products[6](index=6&type=chunk)[7](index=7&type=chunk) - Recently introduced new products include the Ruger American Rifle Generation II, 60th Anniversary 10/22 Carbine, Mini-14 with side-folding stock, and LC Carbine chambered in .45 Auto, which have been met with **strong demand**[8](index=8&type=chunk) [Market and Sales Performance](index=3&type=section&id=Market%20and%20Sales%20Performance) The company experienced a 7% decrease in unit sell-through in 2023, while new product sales significantly increased to 23% of firearm sales - Estimated unit sell-through of the Company's products from independent distributors to retailers decreased **7% in 2023**, compared to a **4% decrease in adjusted NICS background checks**, possibly due to aggressive competitor promotions[8](index=8&type=chunk) New Product Sales Performance (Firearms) | Metric | 2023 | 2022 | Change | | :----- | :--- | :--- | :----- | | New Product Sales (Firearms) | $121.7 million | $78.4 million | +$43.3 million | | % of Firearm Sales | 23% | 14% | +9 percentage points | [Profitability and Inventory Management](index=3&type=section&id=Profitability%20and%20Inventory%20Management) Gross margin decreased from 30% to 25% in 2023 due to various cost pressures and product mix shifts, while finished goods inventory increased and distributor inventories decreased - Gross margin decreased from **30% in 2022 to 25% in 2023**, driven by unfavorable deleveraging of fixed costs, inflationary cost increases, a product mix shift toward lower-margin products, and increased promotional costs, partially offset by increased pricing[8](index=8&type=chunk) - In 2023, the Company's finished goods inventory increased by **30,700 units**, while distributor inventories of the Company's products decreased by **39,100 units**[8](index=8&type=chunk) [Financial Position and Shareholder Returns](index=4&type=section&id=financial_position_and_shareholder_returns) This section details the company's liquidity, capital resources, capital expenditures, and shareholder return strategies [Liquidity and Capital Resources](index=4&type=section&id=Liquidity%20and%20Capital%20Resources) The company generated $33.9 million in cash from operations in 2023, maintaining a strong financial position with $117.7 million in cash and short-term investments and no debt - Cash provided by operations during 2023 was **$33.9 million**[11](index=11&type=chunk) Key Liquidity Metrics (as of Dec 31, 2023) | Metric (as of Dec 31, 2023) | Value | | :-------------------------- | :---- | | Cash and short-term investments | $117.7 million | | Current Ratio | 4.3 to 1 | | Debt | None | [Capital Expenditures](index=4&type=section&id=Capital%20Expenditures) Capital expenditures totaled $15.8 million in 2023 for new products and equipment, with approximately $15 million anticipated for 2024 - Capital expenditures totaled **$15.8 million in 2023**, related to new product introductions and upgrades to manufacturing equipment and facilities[11](index=11&type=chunk) - The Company expects capital expenditures to approximate **$15 million in 2024**[11](index=11&type=chunk) [Shareholder Returns](index=4&type=section&id=Shareholder%20Returns) In 2023, the company returned $122.6 million to shareholders through dividends, including a special dividend, and common stock repurchases - In 2023, the Company returned **$122.6 million to its shareholders**[11](index=11&type=chunk) Shareholder Return Components (2023) | Shareholder Return Component | Amount | Details | | :--------------------------- | :----- | :------ | | Dividends Paid | $110.8 million | Includes a $5.00 per share special dividend paid in January 2023 | | Common Stock Repurchases | $11.8 million | 264,062 shares at an average price of $44.71 per share | [Stockholders' Equity](index=4&type=section&id=Stockholders'%20Equity) As of December 31, 2023, stockholders' equity stood at $331.7 million, with a book value of $19.00 per share Stockholders' Equity Metrics (as of Dec 31, 2023) | Metric (as of Dec 31, 2023) | Value | | :-------------------------- | :---- | | Stockholders' Equity | $331.7 million | | Book Value Per Share | $19.00 | | Cash & Short-term Investments Per Share | $6.74 | [Company Overview](index=5&type=section&id=company_overview) This section provides background on Sturm, Ruger & Co., Inc., its market position, product offerings, corporate philosophy, and a disclaimer on forward-looking statements [About Sturm, Ruger & Co., Inc.](index=5&type=section&id=About%20Sturm,%20Ruger%20%26%20Co.,%20Inc.) Sturm, Ruger & Co., Inc. is a leading US firearms manufacturer, celebrating 75 years with a commitment to quality, innovation, and responsible citizenship - Sturm, Ruger & Co., Inc. is a leading US manufacturer of rugged, reliable firearms for the commercial sporting market, offering almost **800 variations of more than 40 product lines** across Ruger and Marlin brands[12](index=12&type=chunk) - For **75 years**, Ruger has been a model of corporate and community responsibility, with its motto 'Arms Makers for Responsible Citizens' reflecting its commitment to quality and innovative firearms[12](index=12&type=chunk) [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) Forward-looking statements are based on current expectations and subject to risks and uncertainties that could cause actual results to differ materially, with no obligation for revision - Forward-looking statements are based on current expectations and are subject to qualifying risks and uncertainties (e.g., market demand, sales levels, litigation, legislation, accounting estimates) that could cause actual results to differ materially[13](index=13&type=chunk) - Readers are cautioned not to place undue reliance on these statements, and the Company undertakes no obligation to publish revised forward-looking statements to reflect subsequent events or circumstances[13](index=13&type=chunk) [Consolidated Financial Statements](index=6&type=section&id=consolidated_financial_statements) This section presents the company's consolidated balance sheets, statements of income and comprehensive income, and statements of cash flows [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased to $398.8 million in 2023, driven by reduced cash and investments, while total liabilities decreased and stockholders' equity increased Consolidated Balance Sheet Summary (in thousands) | Metric (in thousands) | Dec 31, 2023 | Dec 31, 2022 | Change | | :-------------------- | :----------- | :----------- | :----- | | Total Assets | $398,817 | $484,763 | $(85,946) | | Cash and cash equivalents | $15,174 | $65,173 | $(49,999) | | Short-term investments | $102,485 | $159,132 | $(56,647) | | Net inventories | $79,810 | $64,993 | $14,817 | | Total Current Assets | $271,395 | $361,838 | $(90,443) | | Total Liabilities | $67,096 | $168,025 | $(100,929) | | Total Stockholders' Equity | $331,721 | $316,738 | $14,983 | [Consolidated Statements of Income and Comprehensive Income](index=8&type=section&id=Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) The company experienced significant declines in net sales, gross profit, operating income, and net income from 2022 to 2023, with diluted EPS decreasing to $2.71 Consolidated Income Statement Summary (in thousands, except per share) | Metric (in thousands, except per share) | 2023 | 2022 | 2021 | YoY Change (2023 vs 2022) | | :------------------------------------ | :--- | :--- | :--- | :------------------------ | | Total net sales | $543,767 | $595,842 | $730,736 | $(52,075) | | Gross profit | $133,619 | $180,085 | $279,557 | $(46,466) | | Operating income | $52,084 | $103,456 | $203,136 | $(51,372) | | Net income | $48,215 | $88,332 | $155,899 | $(40,117) | | Diluted Earnings Per Share | $2.71 | $4.96 | $8.78 | $(2.25) | | Cash Dividends Per Share | $6.27 | $2.42 | $3.36 | $3.85 | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash from operations decreased to $33.9 million in 2023, while investing activities shifted to cash usage and financing activities used substantially more cash, resulting in a $49.9 million decrease in cash and cash equivalents Consolidated Cash Flow Summary (in thousands) | Activity (in thousands) | 2023 | 2022 | 2021 | YoY Change (2023 vs 2022) | | :---------------------- | :--- | :--- | :--- | :------------------------ | | Cash provided by operating activities | $33,901 | $77,231 | $172,339 | $(43,330) | | Cash provided by (used for) investing activities | $40,856 | $13,209 | $(107,537) | $27,647 | | Cash used for financing activities | $(124,756) | $(46,311) | $(63,905) | $(78,445) | | (Decrease) increase in cash and cash equivalents | $(49,999) | $44,129 | $897 | $(94,128) | [Non-GAAP Financial Measures](index=10&type=section&id=non_gaap_financial_measures) This section provides a reconciliation of non-GAAP financial measures, specifically EBITDA and EBITDA margin, to GAAP net income for additional operating performance insights [EBITDA Reconciliation](index=10&type=section&id=EBITDA%20Reconciliation) EBITDA and EBITDA margin are presented as non-GAAP measures to provide additional insights into operating results, with 2023 EBITDA at $75.9 million and a 14.0% margin - EBITDA and EBITDA margin are presented as non-GAAP financial measures to provide useful information to investors regarding operating results and the ongoing performance of the underlying business, indicating ability to meet capital expenditure and working capital requirements and profitability[19](index=19&type=chunk) EBITDA Reconciliation (in thousands) | Metric (in thousands) | 2023 | 2022 | YoY Change | | :-------------------- | :--- | :--- | :--------- | | Net income | $48,215 | $88,332 | $(40,117) | | Income tax expense | $10,609 | $19,947 | $(9,338) | | Depreciation and amortization expense | $22,383 | $25,789 | $(3,406) | | Interest expense | $205 | $256 | $(51) | | Interest income | $(5,465) | $(2,552) | $(2,913) | | **EBITDA** | **$75,947** | **$131,772** | **$(55,825)** | | **EBITDA margin** | **14.0%** | **22.1%** | **-8.1 percentage points** |

PART I [Business Overview](index=6&type=section&id=Item%201.%20Business) The company designs, manufactures, and sells firearms, with 99% of sales from domestic firearms, emphasizing innovation and quality - The Company is principally engaged in the design, manufacture, and sale of firearms to domestic customers, with firearms sales representing virtually all (**99%**) of total sales for the year ended December 31, 2023. Export sales account for approximately **6%** of firearms sales[14](index=14&type=chunk)[108](index=108&type=chunk) Net Sales Attributable to Firearms Operations (2021-2023) | Year Ended December 31, | Net Sales (Millions USD) | | :---------------------- | :----------------------- | | 2023 | $540.7 | | 2022 | $593.3 | | 2021 | $728.1 | Net Sales by Firearms Product Category (2021-2023) | Product Category | 2023 (Millions USD) | 2022 (Millions USD) | 2021 (Millions USD) | | :--------------- | :------------------ | :------------------ | :------------------ | | Rifles | $306.8 | $305.4 | $317.5 | | Pistols | $131.4 | $184.7 | $278.4 | | Revolvers | $72.5 | $70.0 | $84.4 | | Accessories | $30.0 | $33.2 | $47.8 | - The Company's firearms are primarily marketed through **15** federally licensed, independent wholesale distributors for the domestic commercial market, **26** for law enforcement, and **44** for export. Top customers in 2023 were Lipsey's (**24%**), Davidson's (**19%**), and Sports South (**15%**)[32](index=32&type=chunk)[33](index=33&type=chunk) Research and Development Expenses (2021-2023) | Year | R&D Expenses (Millions USD) | | :--- | :-------------------------- | | 2023 | $9.8 | | 2022 | $9.6 | | 2021 | $11.7 | - As of February 1, 2024, the Company employed approximately **1,820** full-time employees, with about **32%** having at least ten years of service. The company focuses on competitive compensation, employee development through 'Ruger University,' and maintaining a safe workplace[43](index=43&type=chunk)[45](index=45&type=chunk) [Risk Factors](index=13&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from government policies, litigation, decreased demand, cybersecurity threats, and labor force availability - Changes in government policies and firearms legislation, including potential expansion of the National Firearms Act or repeal of the PLCAA, could significantly restrict sales and increase compliance costs[63](index=63&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk)[66](index=66&type=chunk)[69](index=69&type=chunk) - The Company is exposed to litigation risks, including claims of defective product design, failure to warn, unfair trade practices, and lawsuits from municipalities, which could materially affect financial results[70](index=70&type=chunk) - A significant decrease in demand for the Company's products, driven by macroeconomic downturns or specific firearms industry factors (social, political), could lead to underutilized capacity and reduced profitability[73](index=73&type=chunk)[74](index=74&type=chunk) - Cybersecurity threats, including malicious software and unauthorized data access, could disrupt critical systems, lead to data loss, incur financial losses, and damage the Company's reputation[81](index=81&type=chunk) - The availability and retention of the labor force, especially key management, is critical. A tightening labor market could increase costs and impact the ability to recruit and retain employees[85](index=85&type=chunk) [Unresolved Staff Comments](index=18&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) No unresolved staff comments from the SEC - The Company has no unresolved staff comments[87](index=87&type=chunk) [Cybersecurity](index=18&type=section&id=Item%201C.%20Cybersecurity) The company maintains an Information Security Program, overseen by the Board, to manage cybersecurity risks and protect data - The Company has an Information Security Program to protect personal and proprietary information, ensuring security, confidentiality, and protection against unauthorized access or transfer[88](index=88&type=chunk)[94](index=94&type=chunk) - Cybersecurity risk management is overseen by the Board of Directors, primarily through its Risk Oversight Committee, which regularly receives reports from senior IT leadership and third parties[87](index=87&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) [Properties](index=19&type=section&id=Item%202.%20Properties) The company operates four manufacturing facilities for firearms and castings, plus corporate offices, with all owned real estate unencumbered Manufacturing Facilities (as of December 31, 2023) | Location | Approximate Usable Square Feet | Status | Segment | | :------------------- | :----------------------------- | :----- | :---------------- | | Newport, New Hampshire | 350,000 | Owned | Firearms/Castings | | Prescott, Arizona | 230,000 | Leased | Firearms | | Mayodan, North Carolina | 220,000 | Owned | Firearms | | Earth City, Missouri | 35,000 | Leased | Castings | - Each firearms facility includes enclosed ranges for testing firearms. The Company's principal executive offices are located in Southport, Connecticut[95](index=95&type=chunk)[96](index=96&type=chunk) [Legal Proceedings](index=20&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal proceedings, including a new lawsuit, Jennifer Laws v. Sturm, Ruger & Co - One lawsuit, Jennifer Laws v. Sturm, Ruger & Co., was formally instituted against the Company during the three months ending December 31, 2023[98](index=98&type=chunk) [Mine Safety Disclosures](index=20&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable to the Company[99](index=99&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=21&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NYSE (RGR), with share repurchases authorized and a five-year total return underperforming market indices - The Company's common stock is traded on the New York Stock Exchange under the symbol "RGR," with **1,800** stockholders of record as of February 5, 2024[101](index=101&type=chunk) Issuer Repurchase of Equity Securities (2022-2023) | Period | Total Number of Shares Purchased | Average Price Paid per Share (USD) | | :------------------------- | :------------------------------- | :--------------------------- | | August 28 to October 1, 2022 | 2,136 | $49.97 | | October 30 to November 26, 2022 | 2,304 | $49.77 | | October 29 to November 25, 2023 | 179,341 | $45.20 | | November 26 to December 31, 2023 | 84,721 | $43.67 | | **Total (2023)** | **264,062** | **$44.71** | | **Total (2022)** | **4,440** | **$49.87** | - As of December 31, 2023, approximately **$74.7 million** remained authorized for share repurchases[103](index=103&type=chunk)[173](index=173&type=chunk) Five-Year Cumulative Total Return (Through 12/31/23, $100 invested on 12/31/18) | Index/Company | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | | :----------------------------- | :----- | :----- | :----- | :----- | :----- | :----- | | Sturm, Ruger & Company, Inc. | 100.00 | 89.86 | 134.94 | 147.45 | 124.52 | 114.49 | | Standard & Poors 500 | 100.00 | 131.49 | 155.68 | 200.37 | 164.08 | 207.21 | | Russell 2000 Index | 100.00 | 125.52 | 150.58 | 172.90 | 137.56 | 160.85 | | Dow Jones US Recreational Products TSM | 100.00 | 141.70 | 190.95 | 249.86 | 164.08 | 202.05 | [Item 6. [Reserved]](index=22&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company experienced significant declines in net income and gross profit in 2023 due to reduced firearms sales and increased costs, despite strong liquidity [Company Overview](index=23&type=section&id=Company%20Overview) Sturm, Ruger & Co. primarily sells firearms domestically (99% of sales), with minor casting sales and seasonal demand - Approximately **99%** of the Company's sales are from firearms, with export sales representing about **6%** of total sales[108](index=108&type=chunk) - Less than **1%** of sales are from the castings segment, which also produces MIM parts for internal use[109](index=109&type=chunk) - Orders for many firearm models from independent distributors are typically stronger in the first quarter and weaker in the third quarter[109](index=109&type=chunk) [Results of Operations - 2023 (vs 2022)](index=23&type=section&id=Results%20of%20Operations%20-%202023) In 2023, net sales declined by **8.7%** to **$543.7 million**, with gross profit down **25.8%** and net income falling by **$40.1 million** Product Demand and NICS Background Checks (2021-2023) | Metric | 2023 | 2022 | 2021 | | :---------------------------------------- | :---------- | :---------- | :---------- | | Estimated Units Sold from Distributors to Retailers | 1,406,600 | 1,506,800 | 2,017,800 | | Total Adjusted NICS Background Checks | 15,848,000 | 16,425,000 | 18,515,000 | - Estimated sell-through from distributors to retailers decreased **7%** in 2023 from 2022, while adjusted NICS decreased **4%**, suggesting aggressive promotions and discounts by competitors[110](index=110&type=chunk) Orders Received and Ending Backlog (2021-2023, in millions USD) | Metric | 2023 (Millions USD) | 2022 (Millions USD) | 2021 (Millions USD) | | :--------------------------- | :------------------ | :------------------ | :------------------ | | Orders Received | $433.8 | $451.2 | $606.5 | | Average Sales Price of Orders Received | $374 | $416 | $330 | | Ending Backlog | $229.0 | $314.4 | $429.7 | | Average Sales Price of Ending Backlog | $522 | $486 | $357 | Annual Summary Unit Data (2021-2023) | Metric | 2023 (Units) | 2022 (Units) | 2021 (Units) | | :----------------- | :---------- | :---------- | :---------- | | Units Ordered | 1,159,000 | 1,083,800 | 1,835,500 | | Units Produced | 1,398,200 | 1,733,200 | 2,154,600 | | Units Shipped | 1,367,500 | 1,641,000 | 2,142,900 | | Average Sales Price | $395 | $362 | $340 | | Units – Backlog | 438,800 | 647,300 | 1,204,500 | Net Sales, Cost of Products Sold, and Gross Profit (2022 vs 2023, in millions USD) | Metric | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | % Change | | :---------------------- | :------------------ | :------------------ | :-------------------- | :------- | | Net firearms sales | $540.7 | $593.3 | $(52.6) | (8.9)% | | Net casting sales | $3.0 | $2.5 | $0.5 | 18.3% | | Total net sales | $543.7 | $595.8 | $(52.1) | (8.7)% | | Cost of products sold | $410.1 | $415.7 | $(5.6) | (1.3)% | | Gross profit | $133.6 | $180.1 | $(46.5) | (25.8)% | | Gross margin | 24.6% | 30.2% | (5.6)% | (18.5)% | - New products accounted for **$121.7 million (23%)** of firearms sales in 2023, up from **$78.4 million (14%)** in 2022[120](index=120&type=chunk) Operating Expenses (2022 vs 2023, in millions USD) | Metric | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | % Change | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | :------- | | Selling expenses | $38.8 | $36.1 | $2.7 | 7.4% | | General and administrative expenses | $42.7 | $40.5 | $2.2 | 5.4% | | Total operating expenses | $81.5 | $76.6 | $4.9 | 6.4% | - Operating income decreased by **$51.4 million** to **$52.1 million (9.6% of sales)** in 2023 from **$103.5 million (17.3% of sales)** in 2022[126](index=126&type=chunk) Other Income (2022 vs 2023, in millions USD) | Metric | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | % Change | | :-------------- | :------------------ | :------------------ | :-------------------- | :------- | | Royalty income | $0.6 | $0.8 | $(0.2) | (21.4)% | | Interest income | $5.5 | $2.6 | $2.9 | 114.1% | | Interest expense | $(0.2) | $(0.3) | $0.1 | (19.9)% | | Other income, net | $0.8 | $1.7 | $(0.9) | (51.4)% | | Total other income | $6.7 | $4.8 | $1.9 | 39.7% | - Consolidated net income was **$48.2 million** in 2023, a decrease of **$40.1 million** from **$88.3 million** in 2022. The effective income tax rate was **18.0%** in 2023, down from **18.4%** in 2022[128](index=128&type=chunk)[129](index=129&type=chunk) EBITDA Reconciliation (2022 vs 2023, in thousands USD) | Metric | 2023 (thousands USD) | 2022 (thousands USD) | | :-------------------------------- | :------------------- | :------------------- | | Net income | $48,215 | $88,332 | | Income tax expense | $10,609 | $19,947 | | Depreciation and amortization expense | $22,383 | $25,789 | | Interest expense | $205 | $256 | | Interest income | $(5,465) | $(2,552) | | EBITDA | $75,947 | $131,772 | | EBITDA margin | 14.0% | 22.1% | [Results of Operations - 2022 (vs 2021)](index=33&type=section&id=Results%20of%20Operations%20-%202022) In 2022, net sales fell by **18.5%** to **$595.8 million**, with gross profit down **35.6%** and net income declining by **$67.6 million** Annual Summary Unit Data (2020-2022) | Metric | 2022 (Units) | 2021 (Units) | 2020 (Units) | | :----------------- | :---------- | :---------- | :---------- | | Units Ordered | 1,083,800 | 1,835,500 | 3,041,700 | | Units Produced | 1,733,200 | 2,154,600 | 1,659,100 | | Units Shipped | 1,641,000 | 2,142,900 | 1,717,700 | | Average Sales Price | $362 | $340 | $329 | | Units – Backlog | 647,300 | 1,204,500 | 1,511,900 | | Units – Company Inventory | 112,800 | 20,600 | 8,800 | | Units – Distributor Inventory | 298,400 | 164,200 | 39,200 | | Castings Setups | 55,971 | 68,469 | 66,044 | Orders Received and Ending Backlog (2020-2022, in millions USD) | Metric | 2022 (Millions USD) | 2021 (Millions USD) | 2020 (Millions USD) | | :--------------------------- | :------------------ | :------------------ | :------------------ | | Orders Received | $451.2 | $606.5 | $992.9 | | Average Sales Price of Orders Received | $416 | $330 | $326 | | Ending Backlog | $314.4 | $429.7 | $516.6 | | Average Sales Price of Ending Backlog | $486 | $357 | $342 | - Estimated sell-through from distributors to retailers decreased **25%** in 2022 from 2021, while adjusted NICS decreased **11%**, attributed to decreased consumer demand and increased competitor promotions[139](index=139&type=chunk) Net Sales, Cost of Products Sold, and Gross Profit (2021 vs 2022, in millions USD) | Metric | 2022 (Millions USD) | 2021 (Millions USD) | Change (Millions USD) | % Change | | :---------------------- | :------------------ | :------------------ | :-------------------- | :------- | | Net firearms sales | $593.3 | $728.1 | $(134.8) | (18.5)% | | Net casting sales | $2.5 | $2.6 | $(0.1) | (1.6)% | | Total net sales | $595.8 | $730.7 | $(134.9) | (18.5)% | | Cost of products sold | $415.7 | $451.2 | $(35.5) | (7.8)% | | Gross profit | $180.1 | $279.5 | $(99.4) | (35.6)% | | Gross margin | 30.2% | 38.3% | (8.1)% | (29.7)% | - Operating income decreased by **$99.6 million** to **$103.5 million (17.3% of sales)** in 2022 from **$203.1 million (27.8% of sales)** in 2021[155](index=155&type=chunk) - Consolidated net income was **$88.3 million** in 2022, a decrease of **$67.6 million** from **$155.9 million** in 2021. The effective income tax rate decreased to **18.4%** in 2022 from **24.5%** in 2021, primarily due to research and development tax credits[160](index=160&type=chunk)[161](index=161&type=chunk) EBITDA Reconciliation (2021 vs 2022, in thousands USD) | Metric | 2022 (thousands USD) | 2021 (thousands USD) | | :-------------------------------- | :------------------- | :------------------- | | Net income | $88,332 | $155,899 | | Income tax expense | $19,947 | $50,695 | | Depreciation and amortization expense | $25,789 | $26,152 | | Interest expense | $256 | $164 | | Interest income | $(2,552) | $(49) | | EBITDA | $131,772 | $232,861 | | EBITDA margin | 22.1% | 31.9% | [Financial Condition](index=41&type=section&id=Financial%20Condition) The company maintains strong liquidity with **$15.2 million** cash and **$102.5 million** short-term investments, despite decreased operating cash flow in 2023 - At December 31, 2023, the Company had **$15.2 million** in cash and cash equivalents and **$102.5 million** in short-term investments[165](index=165&type=chunk) - The Company's working capital was **$208.2 million**, with a current ratio of **4.3 to 1**, higher than the previous year due to a special dividend payable[165](index=165&type=chunk) Cash Provided by Operating Activities (2021-2023, in millions USD) | Year | Cash Provided by Operating Activities (Millions USD) | | :--- | :------------------------------------ | | 2023 | $33.9 | | 2022 | $77.2 | | 2021 | $172.3 | - Capital expenditures were **$15.8 million** in 2023 and are expected to approximate **$15 million** in 2024, primarily for new product tooling and manufacturing equipment upgrades[169](index=169&type=chunk) - In 2023, the Company repurchased **264,062 shares** of common stock for **$11.8 million**. In 2022, **4,440 shares** were repurchased for **$0.2 million**[172](index=172&type=chunk) Total Dividends Paid (2021-2023, in millions USD) | Year | Total Dividends Paid (Millions USD) | | :--- | :------------------- | | 2023 | $110.8 | | 2022 | $42.7 | | 2021 | $59.1 | - The Company's practice is to pay a dividend of approximately **40%** of net income. A dividend of **23¢ per share** was authorized on February 16, 2024[175](index=175&type=chunk)[176](index=176&type=chunk) - Contractual obligations at December 31, 2023, included **$51.3 million** for goods/services (due within one year) and **$3.6 million** for operating lease obligations (through 2034)[178](index=178&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risk from short-term interest rate changes on U.S. Treasury investments is low and not hedged - The Company's market risk is primarily from changing interest rates on short-term U.S. Treasury instruments and cash, but this risk is low due to short maturities[194](index=194&type=chunk) - A hypothetical **100 basis point** change in market interest rates would not materially impact the Company's earnings, cash flows, or the fair value of its investments[197](index=197&type=chunk) [Financial Statements and Supplementary Data](index=47&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section provides audited consolidated financial statements, including balance sheets, income, equity, and cash flow statements, with an unqualified audit opinion - RSM US LLP issued an unqualified opinion on the Company's consolidated financial statements for the period ended December 31, 2023, and on the effectiveness of internal control over financial reporting[201](index=201&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk) - The LIFO inventory reserve was identified as a critical audit matter due to the complexities of manual calculations for estimating prevailing inventory costs and current year price level changes[212](index=212&type=chunk)[213](index=213&type=chunk) Consolidated Balance Sheet Highlights (in thousands USD) | Metric | December 31, 2023 (thousands USD) | December 31, 2022 (thousands USD) | | :-------------------------- | :---------------- | :---------------- | | Total Current Assets | $271,395 | $361,838 | | Net Inventories | $79,810 | $64,993 | | Total Assets | $398,817 | $484,763 | | Total Current Liabilities | $63,195 | $163,067 | | Total Stockholders' Equity | $331,721 | $316,738 | Consolidated Statements of Income Highlights (in thousands USD) | Metric | 2023 (thousands USD) | 2022 (thousands USD) | 2021 (thousands USD) | | :-------------------------- | :-------- | :-------- | :-------- | | Total net sales | $543,767 | $595,842 | $730,736 | | Gross profit | $133,619 | $180,085 | $279,557 | | Operating income | $52,084 | $103,456 | $203,136 | | Income before income taxes | $58,824 | $108,279 | $206,594 | | Net income | $48,215 | $88,332 | $155,899 | | Basic Earnings Per Share | $2.73 | $5.00 | $8.87 | | Diluted Earnings Per Share | $2.71 | $4.96 | $8.78 | | Cash Dividends Per Share | $6.27 | $2.42 | $3.36 | Consolidated Statements of Cash Flows Highlights (in thousands USD) | Metric | 2023 (thousands USD) | 2022 (thousands USD) | 2021 (thousands USD) | | :-------------------------------------- | :-------- | :-------- | :-------- | | Cash provided by operating activities | $33,901 | $77,231 | $172,339 | | Cash provided by (used for) investing activities | $40,856 | $13,209 | $(107,537) | | Cash used for financing activities | $(124,756) | $(46,311) | $(63,905) | | Cash and cash equivalents at end of year | $15,174 | $65,173 | $21,044 | [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=78&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) No changes in or disagreements with accountants on accounting and financial disclosure - There are no changes in or disagreements with accountants on accounting and financial disclosure[338](index=338&type=chunk) [Controls and Procedures](index=78&type=section&id=Item%209A.%20Controls%20and%20Procedures) Disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with no material changes - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of December 31, 2023[339](index=339&type=chunk) - Management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2023, based on the COSO 2013 framework, which was audited by RSM US LLP[341](index=341&type=chunk)[342](index=342&type=chunk) - No material changes in internal control over financial reporting occurred during the most recently completed fiscal quarter[343](index=343&type=chunk) [Other Information](index=79&type=section&id=Item%209B.%20Other%20Information) Rule 10b5-1 Trading Plans were adopted by the CEO and a Director in Q4 2023 for common stock sales Rule 10b5-1 Trading Plans Adopted (Q4 2023) | Name | Title | Action | Date Adopted | Expiration Date | Aggregate of Securities to be Purchased/Sold | | :-------------------- | :------------------------ | :------------ | :------------- | :----------------- | :--------------------------------------------- | | Christopher J. Killoy | President and Chief Executive Officer | Adoption of Rule 10b5-1 Plan | November 7, 2023 | May 7, 2024 | 30,000 | | John A. Cosentino, Jr. | Director | Adoption of Rule 10b5-1 Plan | November 7, 2023 | November 7, 2024 | 3,000 | - No non-Rule 10b5-1 trading arrangements were adopted or terminated by the Company's directors or Section 16 officers during the three months ended December 31, 2023[346](index=346&type=chunk) [Disclosure Regarding Foreign Jurisdictions That Prevent Inspections](index=80&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20That%20Prevent%20Inspections) This item is not applicable to the company - Disclosure regarding foreign jurisdictions that prevent inspections is not applicable[348](index=348&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=80&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2024 Proxy Statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2024 Annual Meeting of Stockholders Proxy Statement[349](index=349&type=chunk)[350](index=350&type=chunk) [Executive Compensation](index=80&type=section&id=Item%2011.%20Executive%20Compensation) Director and executive compensation details are incorporated by reference from the 2024 Proxy Statement - Information concerning director and executive compensation is incorporated by reference from the 2024 Annual Meeting of Stockholders Proxy Statement[351](index=351&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=80&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership information is incorporated by reference, with **416,809** securities outstanding and **989,846** available for future issuance under equity plans - Information on security ownership is incorporated by reference from the 2024 Annual Meeting of Stockholders Proxy Statement[352](index=352&type=chunk) Equity Compensation Plan Information (as of December 31, 2023) | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | | :-------------------------------- | :------------------------------------------------------------------------------------------ | :------------------------------------------------------------------------------ | :-------------------------------------------------------------------------------------------------------------------------------------------------- | | Equity compensation plans approved by security holders | | | | | 2017 Stock Incentive Plan | 285,621 | - | 0 | | 2023 Stock Incentive Plan | 131,188 | - | 989,846** | | Equity compensation plans not approved by security holders | | | | | None. | | | | | Total | 416,809 | - | 989,846 | - The **989,846** securities remaining available for future issuance under equity compensation plans include **121,034** unused shares previously authorized under the 2017 SIP, now incorporated into the 2023 SIP[354](index=354&type=chunk) [Certain Relationships and Related Transactions and Director Independence](index=81&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%20and%20Director%20Independence) Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2024 Proxy Statement - Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2024 Annual Meeting of Stockholders Proxy Statement[355](index=355&type=chunk) [Principal Accountant Fees and Services](index=81&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information on principal accountant fees and services and audit committee pre-approval policies is incorporated by reference - Information on principal accountant fees and services and audit committee pre-approval policies is incorporated by reference from the 2024 Annual Meeting of Stockholders Proxy Statement[356](index=356&type=chunk) PART IV [Exhibits and Financial Statement Schedule](index=82&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedule) This section lists all exhibits and financial statement schedules, including corporate documents, agreements, and valuation accounts - This section lists all exhibits, including corporate documents, agreements, stock incentive plans, and certifications, and refers to the financial statements under Item 8[359](index=359&type=chunk)[360](index=360&type=chunk)[361](index=361&type=chunk)[362](index=362&type=chunk) Schedule II—Valuation and Qualifying Accounts (in thousands USD) | Description | Balance at Beginning of Period (thousands USD) | ADDITIONS (1) Charged (Credited) to Costs and Expenses (thousands USD) | (2) Charged to Other Accounts –Describe (thousands USD) | Deductions (Discounts taken/Inventory written off) (thousands USD) | Balance at End of Period (thousands USD) | | :-------------------------------- | :----------------------------- | :------------------------------------------------------- | :-------------------------------------- | :------------------------------------------------- | :----------------------- | | Allowance for doubtful accounts: | | | | | | | Year ended December 31, 2023 | $400 | $0 | $0 | $0 | $400 | | Year ended December 31, 2022 | $400 | $0 | $0 | $0 | $400 | | Year ended December 31, 2021 | $400 | $0 | $0 | $0 | $400 | | Allowance for discounts: | | | | | | | Year ended December 31, 2023 | $1,334 | $12,540 | $0 | $12,710 (a) | $1,164 | | Year ended December 31, 2022 | $1,169 | $13,849 | $0 | $13,684 (a) | $1,334 | | Year ended December 31, 2021 | $1,166 | $16,116 | $0 | $16,113 (a) | $1,169 | | Excess and obsolete inventory reserve: | | | | | | | Year ended December 31, 2023 | $4,812 | $1,615 | $0 | $307 (b) | $6,120 | | Year ended December 31, 2022 | $4,347 | $465 | $0 | $0 (b) | $4,812 | | Year ended December 31, 2021 | $3,394 | $953 | $0 | $0 (b) | $4,347 |

Financial Data and Key Metrics Changes - For Q3 2023, net sales were $120.9 million, down from $139.4 million in Q3 2022, and diluted earnings decreased to $0.42 per share from $1.03 per share in the same period [4][17] - For the first nine months of 2023, net sales totaled $413.2 million, with diluted earnings at $2.13 per share, compared to $446.6 million and $3.90 per share in the prior year [4][17] - Gross margin declined from 28% to 20% due to unfavorable deleveraging of fixed costs from decreased production and increased promotional activities [17] Business Line Data and Key Metrics Changes - New product sales accounted for $90.5 million or 23% of firearm sales in the first nine months of 2023, including products like the MAX-9 pistol and various Marlin rifles [11] - The company maintained a disciplined approach with modest promotions, focusing on specific product families to sustain retail presence [8] Market Data and Key Metrics Changes - NICS background checks decreased by 7% from the first nine months of 2022, indicating a decline in overall firearms demand [19][64] - The estimated unit sell-through from independent distributors to retailers decreased by 8% compared to the prior year period [64] Company Strategy and Development Direction - The company is focused on long-term strategies, adjusting production rates to better match demand, which has led to reduced overall production [19] - The introduction of new products, including the Ruger-made Marlin Dark Series lever-action rifles, aims to appeal to a broader range of firearms enthusiasts [10] - The company is committed to maintaining a debt-free balance sheet and enhancing shareholder value through financial discipline [71] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's position heading into Q4, emphasizing the importance of maintaining inventory levels to capitalize on potential market rebounds [21][27] - The management noted that while there has been some movement in demand, it has not reached the levels seen during the early COVID period [48] - The company is optimistic about the upcoming product launches and the potential for increased sales, particularly in the California market where new products have been introduced [52][68] Other Important Information - The company returned $107.8 million to shareholders through dividends in the first nine months of 2023, with a quarterly dividend of $0.17 declared for November [6] - The company has a current ratio of 4.5:1 and no debt, with cash and short-term investments totaling $120 million [5] Q&A Session Summary Question: Did the mix shift during the quarter lean towards lower-priced pistols? - Management acknowledged a shift towards lower-priced products due to promotional strategies, impacting average selling prices [12][24] Question: How comfortable is the company with its inventory levels? - Management indicated that current inventory levels are balanced, with a focus on ensuring readiness for market rebounds [14][27] Question: What impact does the recent export ban have on the business? - Management stated that 90% of exports remain unaffected by the recent temporary export ban, indicating minimal impact on operations [30][49] Question: Is there pent-up demand for new products in California? - Management confirmed there is pent-up demand for new products in California, particularly for the MAX-9, which has been well received [52][68] Question: What are the expectations for background check data for October? - Management expects to receive background check data quickly, but refrained from making specific predictions about sales trends [60]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Presents unaudited condensed consolidated financial statements, including balance sheets, income statements, and cash flows, prepared under GAAP [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20consolidated%20balance%20sheets) Condensed Consolidated Balance Sheets (Dollars in thousands) | Metric | September 30, 2023 | December 31, 2022 | | :---------------------------- | :------------------- | :------------------ | | Cash | $13,559 | $65,173 | | Short-term investments | $106,451 | $159,132 | | Total Current Assets | $273,960 | $361,838 | | Total Assets | $400,350 | $484,763 | | Total Current Liabilities | $61,187 | $163,067 | | Total Stockholders' Equity | $335,305 | $316,738 | [Condensed Consolidated Statements of Income and Comprehensive Income](index=5&type=section&id=Condensed%20consolidated%20statements%20of%20income%20and%20comprehensive%20income) Condensed Consolidated Statements of Income and Comprehensive Income (Dollars in thousands, except per share) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Oct 1, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Oct 1, 2022 | | :---------------------------------------------- | :------------------------------ | :----------------------------- | :----------------------------- | :---------------------------- | | Total net sales | $120,893 | $139,390 | $413,150 | $446,618 | | Gross profit | $24,728 | $38,869 | $101,362 | $140,531 | | Operating income | $6,326 | $19,859 | $41,762 | $83,776 | | Income before income taxes | $8,089 | $20,991 | $46,814 | $86,614 | | Net income and comprehensive income | $7,431 | $18,389 | $37,966 | $69,378 | | Basic earnings per share | $0.42 | $1.04 | $2.14 | $3.93 | | Cash dividends per share | $0.36 | $0.47 | $6.10 | $2.01 | [Condensed Consolidated Statement of Stockholders' Equity](index=6&type=section&id=Condensed%20consolidated%20statement%20of%20stockholders'%20equity) Condensed Consolidated Statement of Stockholders' Equity (Dollars in thousands) | Metric | December 31, 2022 | September 30, 2023 | | :---------------------------- | :---------------- | :----------------- | | Balance | $316,738 | $335,305 | | Net income | | $37,966 | | Dividends paid | | $(19,462) | | Stock-based compensation expense | | $2,968 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20consolidated%20statements%20of%20cash%20flows) Condensed Consolidated Statements of Cash Flows (Dollars in thousands) | Metric | Nine Months Ended Sep 30, 2023 | Nine Months Ended Oct 1, 2022 | | :---------------------------- | :----------------------------- | :---------------------------- | | Cash provided by operating activities | $17,298 | $50,263 | | Cash provided by investing activities | $41,049 | $17,498 | | Cash used for financing activities | $(109,961) | $(38,952) | | (Decrease) increase in cash and cash equivalents | $(51,614) | $28,809 | | Cash and cash equivalents at end of period | $13,559 | $49,853 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20condensed%20consolidated%20financial%20statements) - The Company is primarily engaged in the design, manufacture, and sale of firearms, which constitute approximately **99% of total sales**. Export sales accounted for approximately **7% of total sales** for the nine-month periods ended September 30, 2023 and October 1, 2022[18](index=18&type=chunk) - Net inventories increased to **$79,271 thousand** as of September 30, 2023, from **$64,993 thousand** at December 31, 2022[30](index=30&type=chunk) - The Company's effective income tax rate was **8.1%** for the three months ended September 30, 2023, down from **12.4%** in the prior year, and **18.9%** for the nine months ended September 30, 2023, down from **19.9%** in the prior year, primarily due to higher than anticipated tax credits[39](index=39&type=chunk) - The Company has a **$40 million** unsecured revolving line of credit, which was unused as of September 30, 2023[35](index=35&type=chunk) - The Company faces eight lawsuits related to municipal litigation, negligence, and unfair trade practices. Management believes these are unlikely to have a material adverse effect on the Company's financial position[54](index=54&type=chunk)[68](index=68&type=chunk) - On October 27, 2023, the Board of Directors authorized a dividend of **17¢ per share**, payable on November 29, 2023[73](index=73&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Analyzes the Company's financial performance, condition, liquidity, and capital resources for the reporting period [Company Overview](index=19&type=section&id=Company%20Overview) - Sturm, Ruger & Company, Inc. primarily designs, manufactures, and sells firearms to domestic customers, accounting for approximately **99% of sales**. The remaining sales are from investment castings[74](index=74&type=chunk)[75](index=75&type=chunk) - Export sales constituted approximately **7% of total sales** for both the nine-month periods ended September 30, 2023, and October 1, 2022[74](index=74&type=chunk) - Orders for firearms typically show seasonality, being stronger in the first quarter and weaker in the third quarter, influenced by the distributor show season[76](index=76&type=chunk) [Results of Operations](index=19&type=section&id=Results%20of%20Operations) [Demand](index=19&type=section&id=Demand) - Estimated unit sell-through from independent distributors to retailers decreased by **8%** in the first nine months of 2023 compared to the prior year[77](index=77&type=chunk) - Adjusted NICS background checks, a proxy for market demand, decreased by **7%** for the same period[77](index=77&type=chunk) Estimated Units Sold and NICS Background Checks | Metric | Q3 2023 | Q2 2023 | Q1 2023 | Q4 2022 | Q3 2022 | Q2 2022 | Q1 2022 | | :------------------------------------ | :------ | :------ | :------ | :------ | :------ | :------ | :------ | | Estimated Units Sold from Distributors to Retailers | 307,400 | 323,000 | 391,500 | 397,800 | 343,500 | 354,300 | 411,200 | | Total adjusted NICS Background Checks (thousands) | 3,284 | 3,654 | 4,168 | 4,531 | 3,764 | 3,917 | 4,213 | [Orders Received and Ending Backlog](index=20&type=section&id=Orders%20Received%20and%20Ending%20Backlog) Orders Received and Ending Backlog (Dollars in millions, except average sales price) | Metric | Q3 2023 | Q2 2023 | Q1 2023 | Q4 2022 | Q3 2022 | Q2 2022 | Q1 2022 | | :------------------------------------------------------- | :------ | :------ | :------ | :------ | :------ | :------ | :------ | | Units Ordered | 176,300 | 258,100 | 408,000 | 156,000 | 295,600 | 250,600 | 381,600 | | Orders Received | $58.8 | $102.1 | $156.2 | $81.0 | $124.3 | $98.9 | $147.0 | | Average Sales Price of Units Ordered | $334 | $396 | $383 | $519 | $421 | $395 | $385 | | Ending Backlog | $234.8 | $293.7 | $327.3 | $314.4 | $377.6 | $389.6 | $420.5 | | Average Sales Price of Ending Unit Backlog | $510 | $496 | $488 | $486 | $427 | $405 | $384 | [Production](index=20&type=section&id=Production) - Overall production decreased by **18%** in the first nine months of 2023 compared to the same period in 2022, in response to estimated sell-through and inventory levels[84](index=84&type=chunk) [Summary Unit Data](index=21&type=section&id=Summary%20Unit%20Data) Summary Unit Data | Metric | Q3 2023 | Q2 2023 | Q1 2023 | Q4 2022 | Q3 2022 | Q2 2022 | Q1 2022 | | :-------------------------- | :------ | :------ | :------ | :------ | :------ | :------ | :------ | | Units Ordered | 176,300 | 258,100 | 408,000 | 156,000 | 295,600 | 250,600 | 381,600 | | Units Produced | 324,500 | 387,400 | 381,000 | 397,300 | 382,800 | 431,800 | 521,300 | | Units Shipped | 308,400 | 336,400 | 384,900 | 393,100 | 373,800 | 382,600 | 491,500 | | Average Sales Price of Units Shipped | $390 | $422 | $387 | $378 | $371 | $366 | $338 | | Ending Unit Backlog | 460,000 | 592,100 | 670,400 | 647,300 | 884,400 | 962,600 | 1,094,600 | [Inventories](index=21&type=section&id=Inventories) - The Company's finished goods inventory increased by **16,100 units** during Q3 2023, while distributor inventories of the Company's products increased by **1,000 units**[86](index=86&type=chunk) Inventory Levels (Units) | Metric | Q3 2023 | Q2 2023 | Q1 2023 | Q4 2022 | Q3 2022 | Q2 2022 | Q1 2022 | | :------------------ | :------ | :------ | :------ | :------ | :------ | :------ | :------ | | Company Inventory | 176,100 | 160,000 | 108,900 | 112,800 | 108,600 | 99,700 | 50,400 | | Distributor Inventory | 306,200 | 305,200 | 291,800 | 298,400 | 303,100 | 272,800 | 244,600 | | Total Inventory | 482,300 | 465,200 | 400,700 | 411,200 | 411,700 | 372,500 | 295,000 | [Net Sales, Cost of Products Sold, and Gross Profit](index=22&type=section&id=Net%20Sales,%20Cost%20of%20Products%20Sold,%20and%20Gross%20Profit) Net Sales, Gross Profit, and Gross Margin (Three Months Ended) (Dollars in millions) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Oct 1, 2022 | Change ($) | Change (%) | | :--------------------------- | :------------------------------ | :----------------------------- | :--------- | :--------- | | Total net sales | $120.9 | $139.4 | $(18.5) | (13.3%) | | Gross profit | $24.7 | $38.9 | $(14.2) | (36.4%) | | Gross margin | 20.5% | 27.9% | (7.4%) | (26.5%) | Net Sales, Gross Profit, and Gross Margin (Nine Months Ended) (Dollars in millions) | Metric | Nine Months Ended Sep 30, 2023 | Nine Months Ended Oct 1, 2022 | Change ($) | Change (%) | | :--------------------------- | :----------------------------- | :---------------------------- | :--------- | :--------- | | Total net sales | $413.2 | $446.6 | $(33.4) | (7.5%) | | Gross profit | $101.4 | $140.5 | $(39.1) | (27.9%) | | Gross margin | 24.5% | 31.5% | (7.0%) | (22.2%) | - New product sales contributed **$27.2 million** (**22.9% of firearm sales**) in Q3 2023 and **$90.5 million** (**22.7% of firearm sales**) in the first nine months of 2023[89](index=89&type=chunk)[93](index=93&type=chunk) - The decrease in gross profit and margin was primarily due to decreased sales, unfavorable fixed cost deleveraging from reduced production, increased promotional costs, inflationary cost increases, and a product mix shift towards lower-margin products[90](index=90&type=chunk)[94](index=94&type=chunk) [Selling and General and Administrative Expenses](index=23&type=section&id=Selling%20and%20General%20and%20Administrative%20Expenses) Selling and General and Administrative Expenses (Three Months Ended) (Dollars in millions) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Oct 1, 2022 | Change ($) | Change (%) | | :--------------------------- | :------------------------------ | :----------------------------- | :--------- | :--------- | | Selling expenses | $8.7 | $8.8 | $(0.1) | (1.1%) | | General and administrative expenses | $9.7 | $10.2 | $(0.5) | (5.0%) | | Total operating expenses | $18.4 | $19.0 | $(0.6) | (3.2%) | Selling and General and Administrative Expenses (Nine Months Ended) (Dollars in millions) | Metric | Nine Months Ended Sep 30, 2023 | Nine Months Ended Oct 1, 2022 | Change ($) | Change (%) | | :--------------------------- | :----------------------------- | :---------------------------- | :--------- | :--------- | | Selling expenses | $27.7 | $25.8 | $1.9 | 7.3% | | General and administrative expenses | $31.9 | $30.9 | $1.0 | 3.1% | | Total operating expenses | $59.6 | $56.7 | $2.9 | 5.0% | - The increase in selling expenses for the nine months was due to the resumption of trade show participation, travel, and advertising, partially offset by decreased sales volume[98](index=98&type=chunk) - The increase in general and administrative expenses for the nine months was primarily due to increased professional service costs, partially offset by decreased incentive compensation[99](index=99&type=chunk) [Other Income](index=24&type=section&id=Other%20Income) Other Income (Three Months Ended) (Dollars in millions) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Oct 1, 2022 | Change ($) | Change (%) | | :--------------------------- | :------------------------------ | :----------------------------- | :--------- | :--------- | | Other income | $1.8 | $1.1 | $0.7 | 55.7% | Other Income (Nine Months Ended) (Dollars in millions) | Metric | Nine Months Ended Sep 30, 2023 | Nine Months Ended Oct 1, 2022 | Change ($) | Change (%) | | :--------------------------- | :----------------------------- | :---------------------------- | :--------- | :--------- | | Other income | $5.1 | $2.8 | $2.3 | 78.0% | - The increase in other income for both periods was primarily driven by higher interest income[100](index=100&type=chunk)[101](index=101&type=chunk) [Non-GAAP Financial Measures (EBITDA)](index=25&type=section&id=Non-GAAP%20Financial%20Measures) EBITDA and EBITDA Margin (Dollars in thousands) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Oct 1, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Oct 1, 2022 | | :---------------------------- | :------------------------------ | :----------------------------- | :----------------------------- | :---------------------------- | | EBITDA | $13,287 | $27,005 | $62,420 | $105,988 | | EBITDA margin | 11.0% | 19.4% | 15.1% | 23.7% | - EBITDA decreased by **50.8%** for the three months and **41.1%** for the nine months ended September 30, 2023, reflecting the decline in net income[105](index=105&type=chunk) [Financial Condition](index=26&type=section&id=Financial%20Condition) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) - As of September 30, 2023, cash and short-term investments totaled **$120.0 million**[107](index=107&type=chunk) - The Company reported working capital of **$212.8 million** and a current ratio of **4.5 to 1**[107](index=107&type=chunk) [Operations (Cash Flow and Raw Materials)](index=26&type=section&id=Operations) - Cash provided by operating activities decreased to **$17.3 million** for the nine months ended September 30, 2023, from **$50.3 million** in the prior year, primarily due to decreased net income and increased prepaid expenses[108](index=108&type=chunk) - The Company faces potential risks from limited supply and increased prices of raw materials, which could adversely affect production and financial results[109](index=109&type=chunk) [Investing and Financing](index=26&type=section&id=Investing%20and%20Financing) - Capital expenditures for the nine months ended September 30, 2023, were **$11.6 million**, a decrease from **$17.2 million** in the prior year. The Company projects approximately **$20 million** in capital expenditures for the full year 2023[110](index=110&type=chunk) - Dividends paid totaled **$107.8 million** during the nine months, including an **$88.3 million special dividend**. The Company's policy is to pay approximately **40% of net income** as dividends[111](index=111&type=chunk) - As of September 30, 2023, **$86.6 million** remained authorized for future stock repurchases, with no shares repurchased during the nine-month period[114](index=114&type=chunk) [Other Operational Matters](index=27&type=section&id=Other%20Operational%20Matters) - The Company operates with **15 independent distributors** for the domestic commercial market, **45 for export**, and **25 for law enforcement markets**[116](index=116&type=chunk) - The Company self-insures a significant portion of its product liability, workers' compensation, medical, and other insurance[116](index=116&type=chunk) [Impact of COVID-19](index=27&type=section&id=Impact%20of%20Covid-19) - The Company did not experience a significant adverse impact on its business from COVID-19 or related government restrictions during the nine months ended September 30, 2023[118](index=118&type=chunk) [Adjustments to Critical Accounting Policies](index=27&type=section&id=Adjustments%20to%20Critical%20Accounting%20Policies) - No adjustments were made to critical accounting estimates and assumptions described in the Company's 2022 Annual Report on Form 10-K[119](index=119&type=chunk) [Forward-Looking Statements and Projections](index=28&type=section&id=Forward-Looking%20Statements%20and%20Projections) - The Company's forward-looking statements are subject to risks and uncertainties, including market demand, sales levels, litigation, legislative impacts, COVID-19, and accounting estimates, which could cause actual results to differ materially[121](index=121&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section assesses the Company's exposure to market risks, particularly interest rate risk - The Company's interest rate market risk is typically low due to limited exposure to changing interest rates on invested cash[122](index=122&type=chunk) - There has been no material change in the Company's exposure to interest rate risks during the three months ended September 30, 2023[122](index=122&type=chunk) [Item 4. Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the Company's disclosure controls and procedures and internal control over financial reporting - The Company's disclosure controls and procedures were deemed effective as of September 30, 2023[124](index=124&type=chunk) - There have been no material changes in the Company's internal control over financial reporting during the quarter ended September 30, 2023, and no material impact from the COVID-19 pandemic[125](index=125&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to the detailed discussion of legal proceedings in Note 13 to the financial statements and confirms no new lawsuits were formally instituted during the quarter - The nature of legal proceedings against the Company is discussed in Note 13 to the financial statements[128](index=128&type=chunk) - No new lawsuits were formally instituted against the Company during the three months ending September 30, 2023[129](index=129&type=chunk) [Item 1A. Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) This section states that there were no material changes to the Company's risk factors during the reporting period - There were no material changes in the Company's risk factors from the information provided in its Annual Report on Form 10-K for the year ended December 31, 2022[130](index=130&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=29&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is not applicable to the Company for the reporting period - Not applicable[131](index=131&type=chunk) [Item 3. Defaults Upon Senior Securities](index=29&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the Company for the reporting period - Not applicable[131](index=131&type=chunk) [Item 4. Mine Safety Disclosures](index=29&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company for the reporting period - Not applicable[131](index=131&type=chunk) [Item 5. Other Information](index=30&type=section&id=Item%205.%20Other%20Information) This section discloses information regarding Rule 10b5-1 trading plans adopted by Company officers - A Rule 10b5-1 Plan was adopted by Michael W. Wilson, Vice President of Operations, on May 22, 2023, for the potential sale of up to **2,919 shares** of common stock, expiring December 31, 2023. This plan was not reported in the previous Form 10-Q due to an administrative oversight[133](index=133&type=chunk) - No other Section 16 officers or directors adopted or terminated Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the three months ended September 30, 2023[132](index=132&type=chunk)[134](index=134&type=chunk) [Item 6. Exhibits](index=31&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including certifications and XBRL documents - Exhibits include certifications pursuant to the Sarbanes-Oxley Act of 2002 (Rules 13a-14(a) and 18 U.S.C. Section 1350) and various XBRL taxonomy extension documents[136](index=136&type=chunk) SIGNATURES [SIGNATURES](index=32&type=section&id=SIGNATURES) This section provides the formal signatures, certifying the submission of the report by authorized personnel - The report was signed on November 1, 2023, by Thomas A. Dineen, Principal Financial Officer, Principal Accounting Officer, Senior Vice President, Treasurer, and Chief Financial Officer[140](index=140&type=chunk)

Financial Data and Key Metrics Changes - For Q2 2023, net sales were $142.8 million, compared to $140.7 million in Q2 2022, showing a slight increase. However, diluted earnings per share decreased from $1.17 in Q2 2022 to $0.91 in Q2 2023 [22][23] - Gross margin declined from 31% in Q2 2022 to 27% in Q2 2023, attributed to a shift in product mix, inflationary cost increases, and unfavorable fixed cost deleveraging [4][22] - Cash and short-term investments totaled $138 million as of July 1, 2023, with a current ratio of 4.5 to 1 and no debt [5][24] Business Line Data and Key Metrics Changes - Sales of new products introduced in the last two years accounted for $63.3 million, or 23% of firearm sales in the first half of 2023 [9] - Sales in certain product categories, including polymer pistols and bolt action rifles, softened, with estimated unit sell-through decreasing by 7% compared to the prior year [7][26] Market Data and Key Metrics Changes - The estimated unit sell-through of products from independent distributors to retailers decreased by 7% in the first half of 2023, while NICS background checks decreased by 4% [7] - Distributor inventories of several product categories remain below pre-pandemic levels, particularly for single-action revolvers and certain rifles [26] Company Strategy and Development Direction - The company is focused on adjusting production levels and product mix to align with current consumer demand, aiming to capitalize on opportunities in the market [26] - New product introductions, such as the Marlin lever-action rifles, are expected to drive demand and have been well received by customers [8][9] Management's Comments on Operating Environment and Future Outlook - Management noted that while there are many promotions in the industry, they do not anticipate a significant increase in demand due to upcoming elections at this time [32][42] - The company is optimistic about the upcoming hunting season and believes it is well-positioned to capitalize on its bolt action rifle offerings [42] Other Important Information - The company returned $101.4 million to shareholders in the first half of 2023 through dividends, including a special dividend of $5 per share [25] - The quarterly dividend is approximately 40% of net income, indicating variability based on earnings [25] Q&A Session Summary Question: Current comfort levels with channel inventory - Management stated they are comfortable with current inventory levels, noting that independent distributors have about 6 turns per year [15][37] Question: Expectations for a heavily promotional holiday season - Management observed strong promotions and rebates in the industry and anticipates this trend to continue as the holiday season approaches [32] Question: Ability to flex up production in response to demand - Management confirmed they have the capacity to increase production, having built over 2 million units annually in the past, and are prepared for potential demand increases [34]

Financial Data and Key Metrics Changes - In Q1 2023, net sales were $149.5 million, down from $166.6 million in Q1 2022, reflecting a 10% decrease in consumer demand [15] - Diluted earnings per share decreased from $1.70 in Q1 2022 to $0.81 in Q1 2023 [15] - Gross margin declined from 35% to 26% due to unfavorable fixed cost deleveraging, inflationary cost increases, and an unfavorable product mix [4][16] - The company maintained a debt-free balance sheet with cash and short-term investments totaling $130 million as of April 1, 2023 [5][17] Business Line Data and Key Metrics Changes - Sales of new products, including various firearms, accounted for $30 million or 21% of total firearm sales in Q1 2023 [8] - The company is ramping up production of new products, with distributor inventories remaining below pre-pandemic levels for several categories [27] Market Data and Key Metrics Changes - NICS background checks decreased by 8% from the previous quarter, following seasonal trends [19] - Estimated unit sell-through from independent distributors to retailers was flat compared to Q4 2022 [7] Company Strategy and Development Direction - The company is focusing on aligning production with consumer demand and managing production levels responsibly [7] - Ruger is entering the firearms optics market with the introduction of the ReadyDot, a micro-reflex sight system designed for specific pistols [9][38] - The company is optimistic about legislative actions to prevent discrimination against the firearms industry by financial institutions [21] Management's Comments on Operating Environment and Future Outlook - Management noted a decline in profitability due to increased promotional costs and a shift towards lower-margin products [16] - The company expects continued promotional activity in the market, particularly as summer approaches [11] - Management expressed confidence in the demand for Marlin rifles and plans to increase production of specific models [12] Other Important Information - The Board declared a quarterly dividend of $0.32 per share, payable on May 31, 2023 [7] - The company returned $96 million to shareholders through dividends in the first quarter of 2023 [18] Q&A Session Summary Question: Can you discuss production and shipments, particularly regarding lower-priced products? - Management noted that there is significant promotional activity in the market, with moderate promotions yielding good success [11] Question: Is there still strong demand for Marlin rifles? - Management confirmed strong demand and plans to ramp up production of Marlin rifles, including the launch of new models [12] Question: How does the company view the entry into the optics category with the ReadyDot? - Management indicated that the ReadyDot was developed by their R&D team and is seen as a promising first step into the optics market, though not a full entry into the category [34][38]

Sturm, Ruger & Company, Inc. (NYSE:RGR) Q4 2022 Earnings Conference Call February 23, 2023 9:00 AM ET Company Participants Chris Killoy - President & Chief Executive Officer Kevin Reid - General Counsel Tom Dineen - Chief Financial Officer Conference Call Participants Mark Smith - Lake Street Rommel Dionisio - Aegis Capital Ryan Hamilton - Morgan Dempsey Capital Operator Thank you for standing by and welcome to Sturm Ruger's Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in ...